The International Monetary Fund (IMF) has projected that the economy of the Middle East and Central Asia will shrink in 2026 due to the effects of the US-Israel war on Iran. Countries such as Kuwait and Qatar are expected to experience double-digit declines in GDP. The IMF's latest economic outlook, released on October 13, 2026, forecasts a contraction of 0.3 percent for the region this year, a significant downgrade from the 1.9 percent growth anticipated in April.
The IMF attributed the downgraded outlook to ongoing disruptions in shipping through the Strait of Hormuz, which is a critical route for global oil supplies. Specific forecasts for GDP contractions include Kuwait at 16.7 percent, Iraq at 16 percent, and Qatar at 15.6 percent. Bahrain's GDP is expected to decrease by 11.3 percent, while Iran's economy is projected to shrink by 7.6 percent.
Saudi Arabia is also expected to face negative growth of 3.3 percent, although it has partially mitigated the impact on its energy sector by increasing oil exports through the East-West pipeline. In contrast, Kyrgyzstan is forecasted to achieve the highest growth in the region, with a projected GDP increase of 9 percent.
The Middle East and Central Asia is the only region anticipated to experience negative growth in 2026. In comparison, emerging and developing Asia's GDP is expected to grow by 5.1 percent, while Sub-Saharan Africa and Latin America and the Caribbean are projected to expand by 4.5 percent and 2.3 percent, respectively. The United States and China are forecasted to grow by 2.3 percent and 4.5 percent, respectively, with the eurozone's GDP estimated to increase by 1.1 percent.
The IMF also noted that global GDP is expected to grow by 3.1 percent, an increase from its previous estimate of 3 percent. The organization highlighted that while economic activity has shown resilience this year, the global economy is facing several risks, including potential escalations in conflicts, changes in expectations regarding artificial intelligence (AI), renewed trade tensions, and fiscal vulnerabilities. Conversely, stronger AI investment momentum and productivity gains, along with a reduction in geopolitical and trade tensions, could enhance growth.